Questions about how to adapt to robo-advice and virtual reality and what the 'human digital future' means for the mortgage advice sector are key issues for the industry, and something advisers and providers will need to address.
There is technology which is helping mortgage advisers to respond to demand for face-to-face interaction as well as the convenience of online services, but which of these is the most useful?
The mortgage industry is being singled out as ripe for innovation and – to use that well-worn term – digital transformation.
While established mortgage brokerages and providers are increasingly turning their attention and investment towards the use of technology, challenger firms are springing up to take hold of what they see as an opportunity to turn an outdated industry model on its head.
Online brokerages launched over the past year include Habito and Trussle, which aim to take full advantage of the customer migration towards seeking help and solutions that are web, tablet or technology based.
The convenience of web-based services will continue to exert pressure on the traditional delivery models of the mortgage advice industry. Habito’s artificially intelligent Digital Mortgage Adviser (DMA) can be accessed via the web from any device, and at any time.
The impact of demand for this ‘anytime, anywhere’ provision of banking services has been dramatic for those companies offering more general financial services.
From 2007 to 2016, the share of individuals using internet banking in the UK doubled from 30 per cent to 60 per cent. Widespread preferences for web-based services in banking have required changes to the banking business model.
High street
The high street bank branch has perhaps seen the biggest change. The country’s seven largest banks have closed a combined total of 1,046 branches over the two years from January 2015 to December 2016.
Given that the average high street branch serves only 71 customers in store per day, this shake up is hardly surprising. For example, banking giant HSBC now reports that 93 per cent of customer contact with the bank is now completed by telephone, internet or smartphone.
Mortgage advisers and brokerage firms should take note of this shift being played out in the sector, considering what innovations will help them to adapt to new consumer expectations.
Along with the tremendous opportunity opened up by technology, there must come a willingness to adapt the fundamentals of the business model. Changes will not just apply to financial products in need of a shake-up, but also to the methods for delivering them.
Looking back at a year in which direct mortgage lending in-branch has dropped by half (51 per cent), and in which intermediary sales have flourished, now is a good time to take stock of the direction of customer demand.
Carefully considering how technology can help to maintain the distinctive attraction of face-to-face advice will help to keep the brokerage business model ahead of consumer trends.
As banks continue to close branches, there is an opportunity for mortgage advisers to build on their market success by remaining responsive to the fact that a clear majority (57 per cent) of millennials – that very demographic which is at the forefront of the digital banking uptake – still crave face to face interaction when applying for a mortgage.
The persistence of this demand for an in person service may come as a surprise. But there is a substantial minority (41 per cent) of surveyed millennials who confirmed that they would be happy to buy a mortgage by using an app – were such a service to exist.
Despite the on-going preference for face-to-face advice, the convenience of web-based services will continue to exert pressure on the traditional delivery models of the mortgage advice industry.
Developing hybrid use cases which combine technology with human input will enhance the face-to-face advice process by driving efficiency and profit.
Human digital future?
Now is a time of great opportunity, when advisers, brokerages and banks can consider adopting technology that will create a human digital future for the mortgage industry.
Even the current developments in robo-advice provision is, instead of a complete eclipse of humans by digital, actually just a rebalancing of the role and relationship that human and digital elements have in the process of supplying mortgage advice services.
But given the on-going value placed on face-to-face interaction by customers looking to purchase a mortgage, there are a number of technologies now being developed with the belief that, at least for the foreseeable future, robo-advisers get this balance wrong.
The industry now needs technology solutions which help to create sustainable models for delivering in person services with ever increasing flexibility and customer convenience, without ever increasing costs.
Work to develop video technologies which allow an adviser to set up a conference call directly into a customer’s living room, are perhaps the most straightforward example of a digitally-supported but human interfaced service.
Another avenue for development in this area will be in and around the opportunity provided by virtual reality technologies.
Estate agents in the US are already starting to use this technology to provide an immersive viewing experience for property sales.
The opportunity now is to apply this technology further up the chain of the property transaction, into the mortgage brokerage process. The rather flat experience of conducting a mortgage advice session via video link can begin to deliver a fuller approximation of the face-to-face interaction that the majority of customers still crave.
Reality-based services
For full realisation of the virtual reality-based mortgage advice service, though, the burden of technology adoption is placed on the consumer as well as the firm or bank.
Another innovative model, and one that we’ve chosen to explore, directs the requirement for new technology adoption away from the consumer and instead seeks to disrupt the way in which a workforce of advisers is organised.
In the extreme manifestation of robo-advice solutions, the role that advisers play in each individual case is shifted dramatically, almost entirely being replaced by technology.
Although less extreme, video link and virtual reality solutions also run the risk of dissolving the human touch that will continue to set high-quality advisers apart.
The ability to maintain face-to-face services at a sustainable cost is the guiding idea behind tools such as Radius, an Uber-like scheduling system.
This tool enables brokerage firms or banks to manage a workforce of mobile mortgage advisers. Using the scheduling algorithms, companies can quickly and easily assign their mobile advisers to conduct appointments with nearby customers at their homes or another convenient location, responding to customer requests for an in person meeting almost immediately.
By means of the Radius tool, the costs of delivering out of hours contact can be significantly reduced, and the logistics challenges simplified. It will increasingly be the willingness of advisers to meet customers on their own terms – both in terms of time and place – that will set mortgage services apart.
Finding a way to make this service cost efficient and sustainable will require a radical shift in thinking around the role that technology has in the mortgage industry’s human digital future.
Digital technologies clearly have the power to enhance mortgage advice processes; the direction of travel is towards greater adoption of technology.
However, keeping up with consumers’ evolving expectations for convenience and speed, while maintaining a high quality advice service which sets the business apart, should see technology focused on improving the logistics and back-end processes which enable this.
While brokers who refuse to go digital will be shunned by consumers, the most successful businesses will use technology to unlock the best of their human skills.
Bhupender Singh is chief executive of Intelenet
